The Profit-maximizing Non-profit

Amihai Glazer

No 131404, Working Papers from University of California-Irvine, Department of Economics

Abstract: Consider an organization that solicits private contributions, which will partly be used to provide a public good. The organization's goals is to maximize its profits, namely the difference between aggregate contributions and the amount it spends on providing the public good. An equilibrium exists in which many persons contribute, each contributor enjoys zero consumer surplus from contributing, and the organization takes as a profit the contributions of all but one donor. Such behavior by the organization is consistent with incomplete crowding out of governmental grants. Furthermore, when the organization is constrained to spend at least fraction of all contributions on the public good, it can have an incentive to produce inefficiently.

Keywords: Non-profit; Public good; Private provision; Philanthropy (search for similar items in EconPapers)
JEL-codes: D64 H41 (search for similar items in EconPapers)
Pages: 18 pages
Date: 2014-01
New Economics Papers: this item is included in nep-mic and nep-pub
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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